1. Field of the Invention
The invention relates generally to determining whether a financial product is eligible for purchase under the terms of business of one or more agreements between the parties to a transaction, and more particularly to the use of an ontological model to facilitate such a determination.
2. Description of the Related Art
Many companies engage in the business of purchasing financial products and assets such as loans. Freddie Mac is one such company and engages primarily in the purchase of home mortgage loans. Often, such purchases are made pursuant to agreements between the parties to the transaction, agreements which control not only the relationship between the parties and their duties and responsibilities but also dictate key terms of the transaction. Specifically, the terms of business contained in the agreements dictate the characteristics a loan must have to be deemed eligible for purchase. Loan characteristics used in such agreements to determine purchase eligibility include, for example: original loan amount, occupancy type, loan purpose, property type, maturity term, and indicator score.
Multiple agreements may be applicable for a given transaction. For example, in the case of home mortgage loan purchases by Freddie Mac, a master agreement known as a Seller/Servicer Guide governs transactions between Freddie Mac and a plurality of lenders. In addition, individual lenders who sell to Freddie Mac may enter into negotiated agreements that change, in some way, the terms of business contained in the master agreement. Accordingly, in order to accurately determine loan purchase eligibility from such lenders, terms of business contained in both the master agreement and the negotiated agreements would need to be considered.
Due to a number of factors, incorrect determinations are sometimes made regarding the purchase eligibility of a loan. That is, due to the large number of terms of business and their intertwined nature, the effects of which are difficult to assess, loans may be allowed to be purchased that should not be eligible. Conversely, loans may be prevented from being purchased due to erroneous determination of ineligibility. Either scenario would have negative financial consequences for the prospective purchaser of the loan. Further complicating the analysis is the fact that the terms of business change over time, often quite frequently. Such changes, if not effected in the analysis, will result in similar discrepancies and consequences.
An additional drawback inherent in current systems is the labor intensive nature of translating terms of business contained in the master and negotiated agreements into business rules that can be used by automated tools to help determine purchase eligibility. These terms of business are often drafted in legally complex language and, as mentioned above, are often intertwined. It is not uncommon for errors to be made in the translation of such terms of business into business rules with mathematical and logical operators for use in an automated process. That the terms of business may not be static and may in fact change many times in a year further complicates the process and requires additional resources to maintain the accuracy of the systems. The introduction of a new purchase eligible loan type into such an environment creates similar difficulties and is labor intensive, thereby extending the “time to market” for such a product.
Even when, under the current systems, the purchase eligibility of a loan is determined accurately, it is difficult to trace that determination back to the specific relevant terms of business used to determine eligibility. Specifically, in the case of loans determined to be ineligible, it is particularly useful to have additional visibility and traceability to the terms of business in the master agreement and/or the negotiated agreement that caused the loan to be deemed ineligible for purchase.